Volatility remains, as stocks head lower

The FTSE looks to close out the week with another bearish shift, as volatility remains elevated. Meanwhile, weak economic data drags the pound lower despite yesterday’s hawkish BoE.

• FTSE trades lower, with volatility remaining elevated

• Pound bounce fades, thanks to weakened trade balance and industrial production figures

• Trade with EU partners rises due to lower sterling

The stock slide is back on the cards today, with yesterday’s sharp deterioration in US indices paving the way for a drop in Asian and European markets. The explosion in volatility this week has pushed the VIX to levels not seen for over two years, with yesterday’s drop in the S&P ensuring we are likely to see vol remain elevated as we head into next week. The energy and utilities sector appears to be one of the main losers this morning, with SEE, Centrica, United Utilities and National Grid all tumbling at the open.

A disappointing set of economic readings from the UK have the pound on the back foot once again, with the impact of yesterday’s hawkish BoE meeting showing little longevity. Interestingly, while Carney and co provided a surprisingly hawkish tone, we have seen little change in rate expectations, with May remaining the one month where markets have any confidence  (>50%) that a rate rise will occur. The deterioration in industrial production and the UK trade balance, alongside a downward revision to last month’s manufacturing production reading has had a profound effect on the pound, with early gains reversed. The deterioration in UK goods trade comes at the hands of rising energy prices,
 where rising imported fuel prices coupled with a fall in UK fuel export volumes had a negative effect on the trade balance for the three-months to December 2017. Interestingly, while the UK make plans to exit the EU, we have seen a sharp rise in the amount of exports to Germany and France, who have sharply increasing their dema
nd in response to the diminished pound.

Ahead of the open we expect the Dow Jones to open 230 points higher, at 24,090.